Environmental quality, public debt and economic development

Mouez Fodha (1, 2) , Thomas Seegmuller (3)

1 CES - Centre d'économie de la Sorbonne
2 PSE - Paris School of Economics
3 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

This article analyzes the consequences on capital accumulation and environmental quality of environmental policies financed by public debt. A public sector of pollution abatement is financed by a tax and/or public debt. We show that if the initial capital stock is high enough, the economy monotonically converges to a long-run steady state. On the contrary, when the initial capital stock is low, the economy is relegated to an environmental-poverty trap. We also explore the implications of public policies on the trap and on the long-run stable steady state. In particular, we find that government should decrease debt and increase pollution abatement to promote capital accumulation and environmental quality at the stable long-run steady state.

Mots clés: public debt; poverty trap; economic development; Environmental policies; pollution abatement

Domaines: Economies et finances

Mouez Fodha, Thomas Seegmuller. Environmental quality, public debt and economic development. Environmental and Resource Economics, 2014, 57, pp.487-504. ⟨10.1007/s10640-013-9639-x⟩. ⟨halshs-00555625⟩